New ID verification rule might effect advisors

ID verification has become an essential component of business operations, especially for companies that compete in industries that typically involve management of consumer data and credit card information. Additionally, with business identity theft increasing in recent years, all companies are at risk of financial loss and hurt reputations stemming from stolen corporate information.

As a result of the dramatic increases in identity theft throughout the past several years, regulators and law enforcement entities have increased compliance requirements in an attempt to curb some of the criminal activity affecting millions of Americans every year. Companies need to ensure strong ID verification practices to defend their reputations and finances from the threats of thieves.

New guidance might be coming
Financial Planning recently reported that the Securities Exchange Commission (SEC) and the Federal Trade Commission (FTC) are both increasing efforts to cut down on identity theft through more stringent policies and a higher frequency of audits. These actions are the product of the Dodd-Frank Act, which demanded certain agencies become more involved with the creation and enforcement of policies that can reduce identity theft losses.

According to the news provider, the new rule from the SEC will be modeled off of the FTC's Red Flags Rule, which requires any business that handles transaction accounts of consumers or other companies to formulate a strong protection policy. While many businesses in a variety of industries are currently under the FTC's rules, the SEC would be making moves to regulate investment advisors. 

However, this has caused a backlash in the industry, as the source explained that the SEC's proposal cites these professionals 44 times. One expert, Karen Barr, who is general counsel for the Investment Advisor Association, believes that these firms should not be overseen by such rules.

"Investment advisors do a lot of what they are required to do already," Barr told Financial Planning. "They protect client information and try to make sure that it is not obtained by other parties and they are also supposed to be on the lookout for signs of anything suspicious."

Still the news provider explained that only 10 percent of all investment advisors and associated firms will likely be effected by the SEC's new rule.

Keeping in the know
Businesses should always ensure they are following the best ID verification policies and procedures to defend against identity theft. As laws continue to proliferate at a rapid pace, professionals in every organization should be trained and prepared for ID verification best practices.